Which of the Following Activities Represents an External Cost

question 42

Multiple Choice

Which of the following activities represents an external cost?

• A) the costs a company imposes on others
• B) the pollination of apple trees that occurs when a beekeeper locates next door to an apple orchard
• C) the increase in property values of vacant lots in an area near where a new amusement park is constructed
• D) the benefits that accrue to society when an individual receives a college education

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Definitions:

Book Value

The value of an asset according to its balance sheet account balance, taking into account the cost of the asset minus depreciation.

Fair Value

The estimated market price of an asset or liability in an orderly transaction between market participants at the measurement date.

Partial Equity Method

An accounting approach used when a company holds a significant influence, but not control, over an investee, recognizing a portion of the investee's income proportional to ownership stake.

Equipment Account

An account on the balance sheet representing the cost of equipment a company owns.